Tuesday, August 19, 2008

(Naked Capitalism) Off and on, usually provoked by the release of a new study, the media will turn to the question of happiness and incomes. While the Wall Street Journal has exhibited a tendency to tout research that shows that the rich are happier, the results are far less clear-cut. Once a certain income level has been reached (typically, enough to provide for a middle class standard of living in that society and allow one to accumulate a cushion for emergencies) more money does not produce much if any gains in happiness. And some findings have been under-reported in the US. For instance, while some studies have found that being in the top income group or having high educational attainment is correlated with higher levels of happiness, living in socially stratified societies leads to less satisfaction across all groups. And remember, Nigeria, hardly a bastion of wealth, has scored as the happiest country in a multi-year international survey.

An article today in the Financial Times suggests that researchers may have been looking at the wrong axis in looking for a strong correlation between income and happiness. Roberto Foa (a researcher in the same international survey mentioned above) contends that freedom is a far more important factor than economic attainment.

If Foa is correct, the post 9/11 surveillance apparatus and restrictions on civil liberties may have a bigger impact than the security-minded might contend. I'll admit to being easily riled, but all sorts of people now seem to feel entitled to make intrusive information requests (for instance, hotel clerks demanding to see photo IDs for rooms that are pre-paid). But only someone who had had a lobotomy could be indifferent to airport security, (particularly when they abuse their authority). And the right to assemble and present one's views, even in passive ways like wearing T-shirts with wrong message, is under attack.

And don't kid yourself that they aren't watching. Your humble blogger got an e-mail from the Department of State inviting me to participate in a webcast (on the economics of Colombia, of all things). The fact that the Department of State (and who knows who else) is monitoring bloggers is scary (I suppose I had naively hoped there were so many that we were all part of a crowd).

In recent years, a small army of happiness gurus has lined up to proclaim the ills of modern society, and its failure to make us feel better. We have more money, say some, but family life has eroded. We live longer, but crime has risen. Some have even blamed affluence itself, arguing that the dizzying range of lifestyle options that we now confront frustrates the pursuit of happiness.

Yet contrary to the assertions of pessimists, newly released data, recently published in an article with colleagues from Jacobs University Bremen and the University of Michigan, shows that today’s world is a happier one. From 1981 to the present, more than 350,000 people from 90 countries were asked about their happiness and their satisfaction with life as a whole...

How is it that the world is getting happier? In the words of Thucydides, the secret of happiness is freedom. In each survey respondents were also asked to rate their sense of free choice in life. In all but three countries where perceived freedom rose, subjective well-being rose also. A chart, produced by the authors, shows how these increases in free choice and subjective well-being are strikingly related.

The world in which we live today is unquestionably a free one. For the first time in history, most of the world is governed democratically, the rights of women and minorities are widely acknowledged, and people, ideas and investment can cross borders. Since the study began in 1981, dozens of middle-income countries have democratised, relieving many from fear of repression: every country making a transition from authoritarian rule to democracy shows a rising sense of free choice. In addition, there has been a sharp rise in the acceptance of gender equality and alternative lifestyles. Countries where this revolution has been most pronounced, such as Canada and Sweden, continue to show rising well-being.

Arguably, no region has experienced this transformation as rapidly as eastern Europe. In the space of two decades, several countries that were members of the Soviet bloc have become members of the European Union, with new freedoms to travel, work and live as never before imaginable. Not only has the proportion claiming to be “very happy” risen in every country except Serbia and Belarus, but this trend has been wholly driven by the younger generation. Among eastern Europeans aged 15-24, the proportion saying they were “very happy” was 9 per cent at the start of the 1990s, roughly the same as in other age groups. By 2006, this proportion had more than doubled, and steady rises were also evident among those in their 30s and 40s. Country after country in the study...exhibits this trend.....

So if the world is becoming happier, what are the implications? First, that the expansion of political and social freedoms over the past quarter of a century is vindicated...

Second, the results may engender caution towards attempts to engineer happiness through public policy. The happy countries include social democracies such as Sweden and Denmark, and more laisser faire economies such as Australia and the US. What they have in common are not their policies but institutions: democracy, rule of law and social tolerance. People are largely capable of engineering their own happiness when given the means to do so.

Third, the link from free choice to rising happiness suggests that the appropriate benchmark of development is not income per capita, but individual freedoms and capabilities. This is the human development perspective associated with Amartya Sen, the Nobel laureate. While income and well-being are closely correlated at early stages of development, once the threat of starvation recedes, social and political freedom appears to be as important.

Though the past 25 years have brought a happier world, there is no certainty that the next 25 will continue to do so. Many low and middle-income countries have experienced exceptionally high rates of growth, ranging from 4 to 11 per cent, while richer countries have undergone falling work hours and social liberation. There is no guarantee that either will persist indefinitely.

Meanwhile democratisation is a one-shot occurrence, and the collapse of communism is in the past. Today, there are as many countries that appear to be sliding into soft authoritarianism and state failure as there are countries that are becoming consolidated democratic cultures, while the future of the global economic order is itself in jeopardy. It would be a huge irony if the benefits of liberal institutions for human happiness were to become evident precisely at the moment when those gains are most at risk.

Note that Foa suggested that international mobility, meaning both freedom to travel and ability to relocate, are part of the happiness equation, and both are becoming more rather than less restricted.

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